Following a period in which the Reserve Bank of Australia has decreased the cash target rate to the level of 2.5% per annum, the Australian yield curve is now upward sloping.  Explain the shape of the yield curve using the expectations theory, and the market segmentation theory, remembering to contrast the underlying assumptions of the two theories.

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In general the yield curve is a graphical curve which shows the interest rate or the yield rate of financial bonds with identical credit quality with different dates or period of maturity The slope of ... View the full answer